Adelaide retailers are offering discounts of up to 75 per cent in a desperate hunt to find the magic point at which consumers will open their purses and wallets and spend.

Weak consumer demand in SA is being driven by unemployment and under-employment, debt and an ageing population (older people spend less), which forces down prices.

When one person loses his or her job, the family suffers. When a 1000 people lose their jobs, everyone suffers.

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When a job is lost or threatened, belt-tightening follows. Families and individuals give discretionary spending the flick. Many of the goods and services we take for granted – such as hiring a plumber, dry cleaning or buying new clothes – are put on hold.

In the June quarter, the national inflation rate fell to 1.0 per cent, well below the Reserve Bank of Australia’s (RBA) target inflation band of 2 to 3 per cent. Last week, the RBA cut the cash rate from 1.75 per cent to a historic low of 1.5 per cent.

In Adelaide, the inflation rate is at a very low 0.5 per cent. Why is demand so weak? In large part it is because unemployment in SA is not 7 per cent; it’s closer to 12 per cent, and under-employment is soaring. The Australian Bureau of Statistics counts working one hour a week as being employed.

Job advertisements in SA were in freefall in the May quarter, down 11 per cent across the board and 13.8 per cent in the private sector, according to the ABS.

Nationally, wage growth is now at levels not seen since the recession of the early 1990s. Private-sector wages in Adelaide struggle to punch above the local inflation rate, and low wage growth has not created full-time jobs.

While the Australian economy (mainly Sydney and Melbourne) is growing, with a GDP of 3.1 per cent in the year to June, consumption is falling. If the eastern states sneeze, Adelaide, with a less diverse economy and smaller population, gets viral pneumonia.

When people don’t buy goods or services, business profits shrink, forcing companies to sell their products even cheaper. Jobs, wages and investment are cut, and the unemployed find it harder to get work.

This penny pinching further depresses the economy. This is the beginning of a deflationary cycle but we’re not at that stage yet.

It’s not all bad news. Food, clothing, holidays and petrol are all getting cheaper. Rents are growing at a snail’s pace and mortgage rates are at record lows.

Lower food prices are in part due to greater competition. Costco and Aldi are helping to drive food prices down and there’s a price war between Coles and Woolies. That’s good news for consumers.

Price falls may also be in part due to the effects of technology. Companies such as Amazon, Uber, Airbnb and Vinomofo (online wine sellers), as well as the advent of certain types of technology, are putting downward pressure on prices.

Sales staff look like shags on a rock among a sea of stock

The best test of economic theory is to leave the comfort of a textbook and spreadsheets and walk in to shops to ask people what is going on. A walk through Rundle Mall, the Elizabeth Shopping Centre and Westfield at West Lakes tells a sorry story.

Many of the shops are deserted or have “for lease” signs pasted across their display windows. Elderly people sit and drink tea at the cafes and many of the “pop-up” stalls have gone. Sales staff look like shags on a rock among a sea of stock.

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I asked a checkout woman in Coles at West Lakes how business was and she said: “I’ve been here (Coles) four years and this is the worst I’ve seen it. Pension day is okay.”

Hold on to your lap rugs when the winter power bills hit, as these will further drive down retail spends. The combination of flat salary growth and the loss of full-time jobs means that as the winter electricity tariff bites, there will not be the commensurate ability to pay.

Adelaide councils such as the City of Charles Sturt, Campbelltown and Playford recently increased their rates up to three times the inflation rate. That hits the hip pocket, too.

Battling deflation is tricky. Cutting state taxes, increasing government spending and cutting interest rates may help. The problem is that zero or very low interest rates provide little incentive for banks to lend. Without credit and loans being written, growth and expansion stalls, putting another brake on economic activity.

Cutting interest rates also puts the squeeze on the baby boomers as it diminishes the yields on their bond or deposit holdings. If there’s one thing Adelaide has got, its people over 60 years of age.

It’s wise not to hold one’s breath for State Government tax relief, either. The recent writedown of $796 million in state tax revenue over the forward estimates includes an expected loss of around $416 million in payroll tax as the economy shudders to a halt.

In 15 years of writing about economics, generational and organisational change, I have not seen such a raft of wicked and serious problems as that which now confronts the great state of South Australia. If there is a devil in economics, it has made a home here.

While it may sound counter-intuitive, now is the time to go out and spend, spend, spend and help reinflate the economy – that’s if you’ve got a job.

Malcolm King, an Adelaide writer, works in generational change and is a regular InDaily columnist.

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